Blunt Plugs Unemployment Tax Loophole; State Collects $869,411


Missouri's unemployment insurance program recovered $869,411.37 in unpaid taxes from an employer who failed to report its full share of state unemployment taxes.

November 18, 2006

State Unemployment Tax Act (SUTA) dumping allows some employers to lower their unemployment taxes by shifting their payrolls to a new corporation or by buying a different firm and using that company's lower tax rate. The accrued charges in the old accounts are left behind and are not picked up by the new accounts. These unpaid charges are not paid by the employer who incurred the charges, but instead are spread among all employers.

Last year Gov. Blunt signed legislation closing loopholes which allowed employers to dodge some of their unemployment insurance taxes. The legislation was in response to the federal "SUTA Dumping Prevention Act of 2004" which was signed by President Bush a year earlier.

"This announcement illustrates that by closing loopholes we were able to bring balance back to our unemployment insurance system," Blunt said. "This legislation will continue to help the Division of Employment Security to administer the system in a manner that is fair to employers and their employees."

The Missouri Division of Employment Security has been investigating this employer, whose identity is to remain anonymous, for Missouri unemployment tax fraud for years 2002 through 2004. The employer has used more than one Missouri unemployment tax account at the same time to report its Missouri employees and has appeared to move its employees from one account to another account to deprive the state of Missouri of unemployment taxes.

"It appears this employer engaged in the practice of SUTA dumping to avoid paying some of their unemployment taxes," said Rod Chapel, director of the Missouri Department of Labor and Industrial Relations (DOLIR). "SUTA dumping harms all employers by dumping the unemployment costs of such employers on the shoulders of others. Those who SUTA dump threaten the integrity of the state's Unemployment Compensation Trust Fund."

Under state statute, the Division of Employment Security is responsible for ensuring all employers comply with the law. By bolstering the program's integrity, the division can help to maintain solvency within the state's unemployment insurance trust fund, which assists those who need and are entitled to unemployment benefits.